1. The use of data as signals about the economy is an important par...

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1. The use of data as signals about the economy is an important part of this course. Although you have not yet studied the discipline, speculate on how following the level of “retail sales” could tell us more than just the dollar value of retail sales in the U.S. economy.

2. If GDP in 2016Q1 for the country Atlantis was $100 billion simoleons, and in 2016Q2 the GDP was $101 billion simoleons, what is the s.a.a.r for GDP in 2016Q2?

3. Define and explain the simple computation of potential GDP. Why do analysts conclude that potential will be different in different countries at one point in time and different in the same country at different times in history? Provide hypothetical examples.

4. Given the definition of potential GDP, answer the following: China has been growing at an annual rate in excess of 9% for many years. Do you think 9% will remain its likely potential growth rate for the next ten years? Why or why not?

5. Personal Consumption Expenditures is comprised of three components; what are they? Two of the three are stable in their growth rates; which two are stable? If stable, why would analysts still spend time analyzing these components of PCE?

6. What are the three components of gross private domestic investment in GDP? Why would economists conclude that watching all three would be valuable when trying to forecast a slowing or accelerating economy? Give hypothetical examples.

7. Assume that the federal government decides to provide $1 billion to food pantries all over the country to help feed the homeless. When the government gives the money to the pantries, does GDP rise? Why or why not? When the pantries spend the money to buy food, does the GDP rise? Why or why not?

8. Governments collect money equal to 40%+ of GDP, but government as a portion of total GDP is only about 20%, give or take a few percent. How can that be?

9. Currently Net Exports is a negative number, equal to -3.3% of GDP. Explain two simple changes in trade that could cause this number to become less negative.

10. Why is it insufficient for economic analysts to focus solely on current dollar GDP over time when evaluating the growth of the economy? Develop a simple numerical example that will demonstrate how a focus on current dollar GDP over a five-year period could mislead an analysts trying to measure real production.

11. If you are given two equally general and simple models of the macro economy, what criterion would you then use in determining which of the two to use in analyzing current and future economic conditions?

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1.   The level of retail sales might tell us more about the growth in that retail sales as it would be in numbers says gallons or tones whereas the dollar value of the retail sales might not reflect the real growth of the retail sales as it might be due to the increase in the prices of that commodity. Hence the real growth of retail sales in other units would be more useful.

2.   The rate of change in the GDP for the country Atlantis grew by $1 billion...

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